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Sterne Agee bank analyst Brett Rabatin on the banks investors should consider for their portfolios.
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Interest rates are double -- store -- they are cutting into profits at some of but one top analysts says there's some great buys out there in bank land if you go beyond the headline names.
So let's get there here with three under the radar bank -- this Brett rabbits and at Sterne Agee -- -- to see you and we look these kinds of segments because.
People been frightened off from some of the big names but let's just look macro right now why regionals.
Well the regionals don't have the risk that the large ones due in terms of international exposure especially -- -- and then the ones that are geographically positioned in faster growth markets.
Have a much better advantage than -- institution that's very large and essentially.
Really can't grow much faster than the overall country what don't.
They have exposure to that makes them a better bet I would assume gigantic bets in European nations that are struggling right now but is there something.
Sort of less obvious here.
Well one -- there's obviously this is a very tough macro environment because of low interest rates and sued the banks that I'm talking about that are very interest -- from.
Investor perspective -- names that don't have big exposures to mortgage backed securities portfolios which reinvesting in those essentially keep it simple.
Low rates pressure on on profit margins.
These banks have less exposure to those and then generally have more opportunities to broker a loan portfolio -- than peers and grow revenues.
We're showing the criteria.
That you use to choose some of these names.
They don't have gigantic securities portfolios have -- as we sit smaller exposure to dangerous things not just Europe bad mortgage backed securities which we know about the markets into big trouble so let's get to some of these names and -- wanna start.
With Texas capital bank shares this is a financial holding company ticker symbol TC BI.
Sony doing very nicely at 23%.
Year to date what makes you think it'll do better as we go forward.
I think is gonna continue to be a a story where you have estimates move higher and so it's -- momentum name.
Where essentially -- are growing very rapidly in Texas.
They have a small securities portfolio.
And their two main businesses which is -- C and I loan book and Texas.
That's very driven by the Houston and the Dallas markets especially.
As well as a mortgage warehouse operation has been very successful.
Those two things are gonna really continue to have down.
I believe post.
Earning power much better then 95% 200% for that matter of the banks out there -- -- like to tell you these stories because it is easy on a day like Friday to get very discouraged and think there's no opportunity Texas Bancshares by the way up 54%.
Year over year.
Not to be outdone by western alliance this is your second -- W a well.
Yeah it's a similar story in terms of loan growth they're growing rapidly in California.
On so they're one of the institutions that have a smaller mortgage backed securities portfolio also has strong long growth opportunity.
And then also as opposed to Texas capital this is an institutional or credit quality is still cleanup and so.
As credit gets better -- profitability I think all move higher and so it's an institution that has both.
Earnings growth from top line revenue growth as well last profitability improvement from credit getting better.
Year to date this stock is up 32%.
32% for WAL.
Your final one while not such a sexy performer I guess over the past year.
Over the past three years triple digit percentage moves and that is east west Bancorp.
Yes this is another story that sets they're headquartered in California and says they have a very unique platform of growing their trade finance operations.
And they did one of the most successful FDIC acquisitions.
And they have a very solid profitability level the opportunity to continue to grow their loan portfolio.
And I think their margin is gonna be better insulated than most of the banks out there and in terms of the next twelve to eighteen months.
Three years ago the stock.
Made a move to today 166%.
To the upside -- names to hear about Bret thank you so much for joining us.
Thank you for having me any time Brett rabbits and his banking analyst at Sterne Agee and David.
